The existing gates can't be changed to 4way. You can use the PB as an arcade controller yes. Just hook up the USB to your computer using the included cable. Check out my other instructable:http://instructables.com.mevn.net/id/Raspberry-Pi-Insi...

Recalbox and Retropi is similar however, from some people have tried this modification, some of them ran into issues when using RetroPi and the Pandora's boxes as USB controllers. Recalbox works fine though. You may look at my other instructable/video where it uses GPIO instead which will work regardless of Recalbox or RetroPi. Both of them will support GPIO properly. Here's my other instructable:http://instructables.com.mevn.net/id/Pandoras-Box-With...

I have other instructables here that show you how to install a RPi inside. Either with or without keeping the original Pandora games inside. http://instructables.com.mevn.net/id/Pandoras-Box-With-Raspberry-Pi-GPIO-Controller/http://instructables.com.mevn.net/id/Raspberry-Pi-Inside-Pandoras-Box-Arcade-System/

This is just an option for those who don't want to drill into walls. I wouldn't put anything that can break or is valuable. Since I've put them up they have never fallen down. The 3M stuff is pretty amazing. But as amazing as they are, they have limits so I wouldn't put stuff that's too heavy.